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CFPB Puts Debt Collectors on Notice

Friday, July 12, 2013 8:00 AM

Debt collection in America has developed into a multi-billion dollar industry, which has created an environment for some debt collectors to cross the boundaries of the law in pursuit of profit. So on July 10, the Consumer Financial Protection Bureau (CFPB) put all such companies under its jurisdiction on notice. Through two bulletins, the CFPB advised all debt collectors that they would be held accountable for unlawful conduct in collecting a consumer's debts. The CFPB also announced that it is now accepting debt collection complaints and is publishing action letters for consumers to consider using in corresponding with debt collectors.

A recent CUNA announcement quoted CFPB Director Richard Cordray as saying, "These bulletins make clear that it doesn't matter who is collecting the debt—unfair, deceptive, or abusive practices are illegal. Consumers need options to help them secure fair and respectful treatment from those debt collectors that fail to abide by the law. They can protect themselves by using our action letters to communicate with debt collectors and by submitting a complaint to us if they believe they are harmed by illegal conduct."

According to the CUNA statement, more than 4,500 debt collection firms exist in the U.S. As of the first quarter of 2013, almost 15 percent of all credit reports for an estimated 30 million consumers show collection items from debt collection. These consumers had at least one debt in collections for amounts that averaged about $1,400.

CFPB's bulletin makes it clear that any entity subject to the Consumer Financial Protection Act of 2010, whether a third-party collector or a creditor collecting its own debts, can be held accountable for any unfair, deceptive, or abusive practices in collecting a consumer’s debts. It states that the following practices, among others, may be illegal:

Threatening action that the debt collector does not have the authority to pursue. Debt collectors and creditors should not make false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of debt.

Falsely representing the character, amount, or legal status of the debt. Debt collectors and creditors should not falsely represent who owns the debt, the amount of debt that is owed, or the debt’s legal status.

Misrepresenting that a consumer’s debt would be waived or forgiven. Debt collectors and creditors should not misrepresent that a debt would be waived or forgiven if a consumer accepted a settlement offer when the company is not, in fact, forgiving or waiving the debt.

Failing to properly post payments or credit to a consumer’s account with payments. Debt collectors and creditors should not fail to properly post payments or credit to a consumer’s account and then charge late fees to that customer if the customer paid on time.